Homeowners associations are required to deal with many details. From handling minor property disputes to managing the overall appearance of neighborhoods, HOAs stay busy concentrating on the community. In the focus to keep homeowners happy, other important factors could be overlooked.
HOAs deal with money, and this, unfortunately, opens opportunities for wrongdoing. These organizations should be mindful of multiple types of crimes that may be committed. The first step is carrying the right HOA insurance. Read on to learn more about HOA crime and coverage.
How Do I Know if I Have HOA Embezzlement?
HOA crime can take multiple forms, including check fraud, computer fraud, invoice padding and false invoices, wire fraud, and embezzling. While all of these forms of dishonesty pose risks to HOA stability, embezzling can continue undetected for long periods of time, draining homeowners and the association of funds.
While the right HOA insurance helps protect HOAs from financial losses, these organizations should become more attentive to accounting procedures and policies as well as possible clues to fund misappropriation. Red flags that may point to embezzlement include:
- Bank statements that remain unreconciled
- Volunteers who are first in or last out of the office daily
- Volunteers who suddenly or mysteriously begin living unusually lavishly
- Unusual fire drills that allow volunteers to obtain illicit copies of financial statements
Risks for HOA fraud increase when one person is solely responsible for collecting, notating, and reconciling financial transactions. Good communication and shared duties help reduce opportunities for HOA fraud. Checks and balances help ensure all parties handle funds correctly.
How Do You Deal With a HOA Corruption?
Crime and fidelity insurance helps protect against losses for an HOA should theft occur. However, if corruption is suspected within an HOA, specific actions can provide answers. These options include:
- Obtain documentation – Board members or residents should first look at documents. These include bank statements, audits, contracts, and minutes of meetings. If these documents seem to point to fraud, HOA boards or residents can get the opinion of an independent CPA.
- Call a meeting – HOA board members can call special meetings, being careful to follow bylaws. Those who suspect fraud can present documentation and evidence at special meetings.
- Employ a professional overseer – HOA boards can hire professional HOA management professionals to handle finances and audit documents for clues to financial wrongdoing.
- Go to law enforcement – If those suspected become defensive and ignore evidence and questions, the matter may need to go to law enforcement.
Nobody wants to think about HOA fraud, but unfortunately, it can happen. Setting checks and balances is important, but so is carrying the right HOA insurance. If crime is suspected, individuals or HOA boards should be proactive. Assuming responsibility and taking action shows respect for the HOA board and for homeowners.
About Kevin Davis Insurance Services
For over 35 years, Kevin Davis Insurance Services has built an impressive reputation as a strong wholesale broker offering insurance products for the community association industry. Our president Kevin Davis and his team take pride in offering committed services to the community association market and providing them with unparalleled access to high-quality coverage, competitive premiums, superior markets, and detailed customer service. To learn more about the coverage we offer, contact us toll-free at (855)-790-7393 to speak with one of our representatives.